New consumer protection measures

New regulations come into force on 1 January, 2015 – make sure you understand your responsibilities beforehand

With consumer protection measures included in the Building Amendment Act 2013 coming into force on 1 January, it’s important to get up to speed now.

The changes will require building contractors to have written contracts, provide information on their relevant skills, experience and qualifications, and disclose their insurance and warranty cover for residential building work valued at more than $30,000.

The strengthened consumer protection measures were set out in the amendments to the Building Act 2004, passed on 28 November 2013, and are described in brief in the cabinet paper, available at mbie.govt.nz.

While the new regulations are technically aimed at protecting consumers, MBIE says the new measures will also help protect builders, particularly those who haven’t been using written contracts. Most disputes come back to what’s written in the contract and, without one, it will be based on minimum clauses outlined in the yet-to-be published guidance.

MBIE hopes to publish guidance on the new regulations in early December.

The new consumer protection measures include:*

1) Mandatory written contracts for residential building work over $30,000. If you’re part of the Certified Builders Association of New Zealand, or a Registered Master Builder, you will have a contract at your disposal. If not, MBIE and Standards NZ are promoting using NZS 3902:2004 as the default building contract for those looking to comply with the new requirements.

2) A requirement for building contractors to provide a checklist and disclose certain information for residential building work over $30,000 before the home owner signs a contract (or when the client has requested this information or checklist).  This checklist – which cannot be amended – will be available on the MBIE website.

• Information about the business the consumer is contracting with to carry out the building work.
• Information about the key contact person (eg project manager or site foreman) who, as far as the building contractor is aware, will be involved in carrying out or supervising the building work. This person must be available to the client to discuss any aspect of the building project. The building contractor may change the person before or after a contract is signed, provided the building contractor notifies the client if this happens.
• Information about insurance policies the building contractor has, or intends to have, in relation to the building work.
• Information about any guarantees or warranties the building contractor offers in relation to the building work.
• The checklist, which provides standard information to assist consumers with engaging a building contractor.

3) Details of the minimum content that must be included in residential building contracts.

4) Details of the clauses that are taken to be included in a residential building contract that does not contain all of the minimum content, or in a contract for work over $30,000 that is not in writing. This includes which party will be responsible for obtaining building consents, how variations to the building work covered by the contract will be agreed, the payment process and more.

5) Details of the information that a building contractor must provide to the client after the building work is completed, including:

A copy of any current policy of insurance the building contractor holds in relation to the building work done under the residential building contract. This does not include policies that expire on completion of the building work.

A copy of any guarantees or warranties that apply to materials or services that comprise the building work, including information about how to make a claim under the guarantee or warranty, whether the guarantee or warranty is transferrable and whether it needs to be signed and returned to the issuer in order to be valid.

Information about the processes and materials to be used to maintain any element of the building work where maintenance is required to meet the durability requirements of the Building Code or will affect the validity of any applicable guarantee or warranty.

6) Infringement fees of $500 for breaching the contract, disclosure or checklist requirements, as well as new powers enabling MBIE to prosecute people for providing false or misleading disclosure information.

7)  A new 12-month ‘defect repair period’ will also kick-in, placing the responsibility on the building contractor to remedy any defects they have been told about. If the contractor disagrees, the burden of proof is on he/she to demonstrate their work is not defective.  This repair period will not apply to work carried out before 1 January 2015 or a building contract signed before 1 January 2015.

MBIE is currently working with the industry to develop guidance to assist both consumers and building practitioners in understanding what should be considered a ‘defect’. It will provide examples of what is and what isn’t a defect, and should be available in December.

*For more information on these new legislative requirements and more detail on the information requirements for building contractors (see the Cabinet paper) the MBIE website

NOTE: Although the Cabinet paper proposes $20,000 as the minimum price of residential building work requiring contracts, checklists and disclosure of information, Cabinet decided to increase this price to $30,000.